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DexCom (DXCM) Q3 Earnings and Revenues Surpass Estimates

DexCom, Inc.’s DXCM third-quarter 2020 adjusted earnings of 94 cents per share surpassed the Zacks Consensus Estimate of 64 cents by 46.9%. Moreover, the bottom line improved 44.6% on a year-over-year basis.

Total revenues grew 26.4% to $500.9 million on a year-over-year basis and beat the Zacks Consensus Estimate by 4.9%. Rising volumes across all channels, strong new patient additions and increasing global awareness of the benefits of real-time Continuous Glucose Monitoring (CGM) contributed to the upside.

Segmental Details

Revenues at the Sensor and other revenue segment (81% of total revenues) climbed 28.1% on a year-over-year basis to $406.3 million. Hardware revenues (19%) improved 19.6% year over year to $94.6 million.

Geographical Details

U.S. revenues (80% of total revenues) increased 29.1% on a year-over-year basis to $398.6 million. International revenues (20%) grew 16.9% year over year to $102.3 million.

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. price-consensus-eps-surprise-chart | DexCom, Inc. Quote

Margin Analysis

Adjusted gross profit in the quarter under review totaled $340.7 million, up 37.9% year over year. DexCom generated adjusted gross margin (as a percentage of revenues) of 68%, which expanded 570 basis points (bps) year over year.

Research and development expenses amounted to $87.7 million in the quarter, up 31.5% year over year. Selling, general and administrative expenses totaled $158.6 million in the reported quarter, up 27.7% year over year.

The company reported total operating expenses of $246.3 million, up 29% year over year.

The company reported adjusted operating income of $95 million, up 60.7% from the prior-year quarter. Adjusted operating margin (as a percentage of revenues) of 19%, which expanded 410 bps year over year.

Financial Position

The company exited the third quarter with $530 million in cash and cash equivalents, which improved 27.1% sequentially.

2020 Guidance

DexCom has decided to update full-year 2020 guidance.

The company expects revenues to be around $1.90 billion, reflecting growth of 29% from the previous year. While adjusted gross margin is anticipated to meet or exceed 66% (up from the prior projection of 65%), adjusted operating margin is estimated to be 16% or higher (up from the previous expectation of 14%).

Wrapping Up

DexCom exited the third quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Impressive contributions from the segments were key catalysts. Expansion in both gross and operating margins is a positive.

Additionally, the glucose monitoring market presents significant commercial opportunity for this company. DexCom’s prospects in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.

During the quarter under review, the company created the first-ever registry focused on tracking outcomes of in-hospital real-time CGM use in response to the COVID-19 pandemic. Additionally, DexCom started the Patient Assistance Program to help current U.S. customers who have lost their health insurance coverage as a result of the impact of the pandemic. These developments instill optimism in the stock amid this uncertain period.

Meanwhile, cut-throat competition in the market for blood & glucose monitoring devices remains a concern.

Zacks Rank

Currently, DexCom carries a Zacks Rank of 3 (Hold).

Key Picks

Some better-ranked stocks, which are expected to report earnings soon, are Insulet Corporation PODD, IDEXX Laboratories, Inc. IDXX and Quidel Corporation QDEL.

The Zacks Consensus Estimate for Insulet’s third-quarter 2020 adjusted EPS is currently pegged at 6 cents. The consensus estimate for third-quarter revenues stands at $220.89 million. The company, which currently carries a Zacks Rank #1 (Strong Buy), is expected to release results soon. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2020 adjusted EPS is currently pegged at $1.41. The consensus estimate for third-quarter revenues stands at $666.7 million.

The Zacks Consensus Estimate for Quidel’s third-quarter 2020 revenues is pegged at $476.1 million, suggesting year-over-year improvement of 276.4%. The same for EPS stands at $4.58, indicating growth of 554.3% from the year-ago reported figure. The company currently sports a Zacks Rank #1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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